Golden Streams: Top Gold Royalty Stocks to Cash In on Precious Metal Gains

by Fred Fuld III

Gold and silver royalty and streaming companies offer a unique way to invest in precious metals. Unlike traditional mining companies, royalty companies provide upfront capital to miners in exchange for a percentage of the revenue or the metal produced from a mine. Streaming companies, on the other hand, provide financing to mining operations in exchange for the right to purchase a percentage of the mine’s production at a predetermined price. These business models allow royalty and streaming companies to benefit from rising metal prices without the operational risks associated with mining, such as production costs and environmental challenges.

The price of gold has been on an upward trend due to several factors, including economic uncertainty, inflation concerns, and geopolitical tensions. Gold is often seen as a safe-haven asset during times of crisis, and with central banks around the world adopting loose monetary policies, the appeal of gold and silver as a hedge against inflation has increased. Additionally, declining real interest rates have made non-yielding assets like gold more attractive to investors. As these factors persist, the price of gold may continue to rise, benefiting companies in the royalty and streaming sectors. In this article, we’ll explore five top gold and silver royalty and streaming stocks—Osisko Gold Royalties (OR), Wheaton Precious Metals (WPM), Royal Gold (RGLD), Franco-Nevada (FNV), and Sandstorm Gold (SAND). Each of these companies has a market capitalization exceeding $1 billion and offers a dividend yield above 1%.

Osisko Gold Royalties (OR)

Osisko Gold Royalties, headquartered in Montreal, Canada, is a leading royalty company focused on precious metals. The company’s flagship asset is its 5% net smelter return royalty on the Canadian Malartic mine, one of the largest gold mines in Canada. Osisko has a diversified portfolio of over 160 royalties and streams, providing it with exposure to a wide range of precious metal projects across North and South America. The company’s strategic focus on low-cost, long-life assets has positioned it well to benefit from rising gold prices.

The stock, which has a low amount of long term debt, trades at 30 times forward earnings. With a market capitalization of over $2 billion and a dividend yield of approximately 1.5%, Osisko Gold Royalties is an attractive option for investors seeking exposure to the gold market.

Wheaton Precious Metals (WPM)

Wheaton Precious Metals, based in Vancouver, Canada, is one of the largest precious metals streaming companies in the world. The company has a diversified portfolio of streams on gold, silver, and palladium mines located in the Americas and Europe. Wheaton’s business model allows it to acquire metals at a fixed cost, providing significant upside potential in a rising price environment. The company’s high-quality assets and strong financial position have made it a leader in the streaming industry.

The company is debt free, has a price to earnings ratio of 46, and a forward P/E of 35. A market capitalization of over $20 billion and a dividend yield of around 1.2%, Wheaton Precious Metals offers a compelling investment opportunity for those looking to benefit from higher precious metal prices.

Royal Gold (RGLD)

Royal Gold, headquartered in Denver, Colorado, is a premier gold royalty and streaming company with a portfolio of over 180 properties across the globe. The company’s portfolio includes some of the most prolific gold mines in the world, including the Mount Milligan mine in Canada and the Peñasquito mine in Mexico. Royal Gold’s focus on high-quality, low-cost assets has allowed it to generate strong cash flows and consistently pay dividends to shareholders.

This company, with no long term debt, has a price to earnings ratio of 36, and a forward P/E of 22. The company’s market capitalization exceeds $8 billion, and it offers a dividend yield of approximately 1.2%. Royal Gold’s diversified portfolio and solid financials make it a top pick in the royalty and streaming space.

Franco-Nevada (FNV)

Franco-Nevada, based in Toronto, Canada, is the largest gold-focused royalty and streaming company in the world. The company has a diverse portfolio of over 400 assets, including gold, silver, and other precious metals, as well as oil and gas interests. Franco-Nevada’s business model is centered around low-risk, high-margin investments that provide long-term cash flow stability. The company’s strong balance sheet and disciplined approach to capital allocation have made it a favorite among investors.

The company is debt free and has a forward P/E of 31. With a market capitalization of over $30 billion and a dividend yield of about 1%, Franco-Nevada is a cornerstone investment for those seeking exposure to gold and silver.

Sandstorm Gold (SAND)

Sandstorm Gold, headquartered in Vancouver, Canada, is a growing gold streaming and royalty company with a portfolio of over 200 assets across the globe. The company has focused on acquiring streams and royalties on early-stage projects with significant exploration potential, providing it with exposure to future growth. Sandstorm’s management team has a strong track record of identifying and investing in high-quality assets, positioning the company for long-term success.

The stock’s trailing P/E is fairly high at 54, but the forward P/E is 34. Sporting a market capitalization of over $1 billion and a dividend yield of approximately 1%, Sandstorm Gold is an emerging player in the royalty and streaming sector.

Summary

As a group, these top gold and silver royalty and streaming stocks—Osisko Gold Royalties, Wheaton Precious Metals, Royal Gold, Franco-Nevada, and Sandstorm Gold—offer investors a unique and low-risk way to gain exposure to the rising prices of precious metals.

With market capitalizations exceeding $1 billion and dividend yields above 1%, these companies provide a combination of stability, income, and growth potential.

Their business models, which focus on acquiring royalties and streams from high-quality assets, position them well to benefit from ongoing economic uncertainty and the continued rise in gold prices. For investors looking to capitalize on the strength of the gold market, these stocks are worth serious consideration.

Disclosure: Author didn’t own any of the above at the time the article was written.

Liquid Assets: The Best Water Utility Stocks to Quench Your Portfolio’s Thirst

by Fred Fuld III

4 Minutes Read Time

The water utility industry is an essential sector within the broader utilities industry, providing one of the most vital resources—clean water—to millions of people across the country. Water utilities, much like their electric counterparts, are known for their stability and reliable dividend payouts, making them an attractive option for income-seeking investors.

In a low-interest-rate environment, dividend-paying utilities become even more appealing as their yields offer a better return compared to bonds and other fixed-income investments. In this article, we’ll focus on four top water utility stocks—American Water Works Co. Inc. (AWK), American States Water Co. (AWR), California Water Service Group (CWT), and Essential Utilities Inc. (WTRG). Each of these stocks has a market capitalization exceeding $3 billion and offers a dividend yield of over 2%.

American Water Works Co. Inc. (AWK)

American Water Works Co. Inc., headquartered in Camden, New Jersey, is the largest publicly traded water and wastewater utility in the United States. Serving more than 14 million people in 24 states, American Water Works has a vast and diversified customer base. The company’s focus on operational efficiency, infrastructure investment, and regulatory compliance has helped it achieve steady growth over the years.

With a market capitalization exceeding $27 billion, American Water Works is a leader in the industry. The company’s strong financial performance is complemented by a dividend yield of around 2%, making it a reliable choice for income-focused investors.

The stock has a trailing price to earnings ratio of 29 and a forward P/E of 25.

American States Water Co. (AWR)

American States Water Co., based in San Dimas, California, provides water and electricity services to customers in California and through its subsidiary, Golden State Water Company. With a history dating back to 1929, American States Water has a long track record of stability and consistent dividend payments. The company’s regulated water utility operations are its primary revenue driver, serving approximately 260,000 customers across the state.

American States Water has a market capitalization of over $3 billion and offers a dividend yield of over 2.2%. The company’s commitment to sustainable water management and infrastructure development positions it well for long-term growth.

The stock has a trailing price to earnings ratio of 28 and a forward P/E of 24.

California Water Service Group (CWT)

California Water Service Group, headquartered in San Jose, California, is the third-largest publicly traded water utility in the United States. The company provides water utility services to approximately 2 million people across California, Washington, New Mexico, and Hawaii. California Water Service Group is known for its customer-centric approach and dedication to maintaining high water quality standards.

The company’s market capitalization is over $3.5 billion, and it offers a dividend yield of more than 2.1%. California Water Service Group’s ongoing investments in infrastructure and water conservation efforts underscore its commitment to long-term sustainability and growth.

The stock has a trailing price to earnings ratio of 17 and a forward P/E of 22.

Essential Utilities Inc. (WTRG)

Essential Utilities Inc., formerly known as Aqua America, is a water and natural gas utility company based in Bryn Mawr, Pennsylvania. Essential Utilities serves more than 5 million customers across 10 states, making it one of the largest water utilities in the country. The company’s strategic acquisitions and investments in infrastructure have driven its growth and expansion.

Essential Utilities has a market capitalization exceeding $11 billion and offers a dividend yield of over 3%. The company’s diversified utility operations, coupled with its focus on environmental stewardship, make it a strong contender in the water utility sector.

The stock has a trailing price to earnings ratio of 19 and a forward P/E of 18.

Summary

As a group, these top water utility stocks—American Water Works, American States Water, California Water Service Group, and Essential Utilities—offer a compelling combination of stability, income, and growth potential. With moderately favorable earnings ratios, market caps over $3 billion, and dividend yields above 2%, they are well-positioned to provide reliable returns in a low-interest-rate environment. These companies’ focus on infrastructure investment, sustainability, and regulatory compliance ensures their long-term viability and growth. For investors seeking to add high-quality water utility stocks to their portfolios, these four companies are worth serious consideration.

Disclosure: Author owns CWT.

Get a Charge Out of Electric Utility Stocks

by Fred Fuld III

The electric utility industry is a cornerstone of the global economy, providing essential services that power homes, businesses, and industries. These companies are typically characterized by their stability and consistent dividend payments, making them a popular choice among income-seeking investors. In particular, dividend-paying utilities tend to benefit from lower interest rates, as their relatively high yields become more attractive compared to bonds and other fixed-income investments. In this article, we’ll examine five top electric utility stocks—Avangrid Inc. (AGR), Evergy Inc. (EVRG), Exelon Corp. (EXC), NorthWestern Energy Group Inc. (NWE), and Portland General Electric Co. (POR). Each of these stocks boasts a price-to-earnings (P/E) ratio of less than 20, a forward P/E ratio of under 15, and a dividend yield of over 3%.

Avangrid Inc. (AGR)

Avangrid Inc. is a diversified energy and utility company headquartered in Orange, Connecticut. It operates through two primary business segments: Networks and Renewables. The Networks segment provides electric and gas distribution services to customers in New York and New England, while the Renewables segment is a leader in wind and solar energy generation in the United States. Avangrid’s commitment to renewable energy positions it well for growth, especially as the world shifts towards cleaner energy sources. The company’s P/E ratio and forward P/E ratio indicate it is attractively valued, and with a dividend yield exceeding 4%, it provides a solid income stream for investors. Quarterly revenue growth year-over-year increased by over 19% while earnings per share skyrocketed by more than 98%.

Evergy Inc. (EVRG)

Evergy Inc., based in Kansas City, Missouri, serves approximately 1.6 million customers in Kansas and Missouri. The company was formed through the merger of Westar Energy and Great Plains Energy in 2018, creating a significant regional utility player. Evergy is focused on modernizing its grid infrastructure and increasing its investment in renewable energy. The company’s stable cash flows and commitment to returning capital to shareholders are reflected in its strong dividend yield of over 3.5%. With a forward P/E ratio below 15, Evergy offers both value and income potential. Quarterly sales grew by 3% but earnings tanked by over 13%, but are expected to grow by 6.4% next year.

Exelon Corp. (EXC)

Exelon Corp., headquartered in Chicago, Illinois, is one of the largest utility holding companies in the United States. It operates through several subsidiaries, providing electricity to millions of customers across Illinois, Pennsylvania, Maryland, and other states. Exelon’s diverse energy mix includes nuclear, natural gas, wind, and solar power, making it a leader in low-carbon electricity generation. The company has a strong track record of operational excellence and financial stability, with a P/E ratio under 20 and a forward P/E ratio under 15, indicating its shares are reasonably priced. Exelon’s dividend yield, hovering around 3.5%, adds to its appeal for income-focused investors. Quarterly revenue growth year-over-year went up by over 11% while earnings per share jumped about 30%.

NorthWestern Energy Group Inc. (NWE)

NorthWestern Energy Group Inc. provides electricity and natural gas to customers in Montana, South Dakota, and Nebraska. The company, headquartered in Sioux Falls, South Dakota, has a strong regional presence and a focus on serving rural communities. NorthWestern Energy is known for its consistent performance and steady dividend payouts, which currently yield over 4%. The company’s P/E and forward P/E ratios suggest it is undervalued relative to its earnings potential, making it an attractive option for investors seeking both growth and income.

Portland General Electric Co. (POR)

Portland General Electric Co., based in Portland, Oregon, is an integrated electric utility that serves residential, commercial, and industrial customers in the Portland metropolitan area. The company has been a leader in transitioning to renewable energy, with a significant portion of its electricity generated from hydroelectric, wind, and solar sources. Portland General Electric’s strategic focus on sustainability and innovation has positioned it well for future growth. The company offers a dividend yield of over 3.5% and trades at a forward P/E ratio below 15, making it a compelling choice for value-oriented investors.

Summary

As a group, these top electric utility stocks—Avangrid, Evergy, Exelon, NorthWestern Energy, and Portland General Electric—offer a combination of value, income, and growth potential. With solid ratios and yields, they present attractive opportunities for investors seeking stability and reliable income in a low-interest-rate environment. Moreover, their focus on renewable energy and infrastructure modernization positions them well for long-term growth as the world transitions towards cleaner energy solutions. For those looking to add high-quality utility stocks to their portfolios, these five companies are worth considering.

Disclosure: Author didn’t own any of the above at the time the article was written.

Stocks Going Ex Dividend in August 2024

The following is a short list of some of the many stocks going ex-dividend during the next month, which can be helpful for traders and investors interested in the stock trading technique known as “Buying Dividends” or “Dividend Capture.” This strategy involves purchasing stocks before the ex dividend date and selling them shortly after the ex-date at a similar price, while still being eligible to receive the dividend payment.

Although this technique generally proves effective in bull markets and flat or choppy markets, it is advisable to exercise caution and consider avoiding this strategy during bear markets. To qualify for the dividend, it is necessary to buy the stock before the ex-dividend date and refrain from selling it until on or after the ex-date.

However, it is important to note that the actual dividend may not be paid for several weeks, as the payment date can be delayed by up to two months after the ex-date.

For investors seeking a comprehensive list of stocks going ex-dividend in the near future, WallStreetNewsNetwork.com has compiled a downloadable list containing numerous dividend-paying companies. Here are a few examples showcasing the stock symbol, ex-dividend date, periodic dividend amount, and annual yield.

Ally Financial Inc. (ALLY)8/1/20240.302.73%
Citigroup, Inc. (C)8/5/20240.563.30%
Wells Fargo & Company (WFC)8/9/20240.402.65%
Microsoft Corporation (MSFT)8/15/20240.750.71%
Walmart Inc. (WMT)8/16/20240.20751.19%
Target Corporation (TGT)8/21/20241.123.01%
Johnson & Johnson (JNJ)8/27/20241.243.09%
T-Mobile US, Inc. (TMUS)8/30/20240.651.48%

To access the entire list of over 100 ex-dividend stocks, subscribers will receive an email in the next couple days with the full list. If you are not already a subscriber, you can sign up using the provided signup box below. Don’t miss out on this valuable information, and the best part is that it’s free!

Dividend Definitions

To better understand the dividend-related terms, let’s define them:

Declaration date: This refers to the day when a company announces its intention to distribute a dividend in the future.
Ex-dividend date: On this day, if you purchase the stock, you would not be eligible to receive the upcoming dividend. It is also the first day on which a shareholder can sell their shares and still receive the dividend.
Record date: This marks the day when you must be recorded on the company’s books as a shareholder to qualify for the dividend. Typically, the ex-dividend date is set two business days prior to the record date.
Payment date: This is the day on which the dividend payment is actually made to the eligible shareholders. It’s important to note that the payment date can be as long as two months after the ex-date.

Before implementing the “Buying Dividends” technique, it is crucial to reconfirm the ex-dividend date with the respective company to ensure accuracy and avoid any unexpected changes.

In conclusion, being aware of the stocks going ex-dividend can be advantageous for traders and investors employing the “Buying Dividends” strategy. WallStreetNewsNetwork.com provides a convenient resource to access a comprehensive list of such stocks, allowing individuals to plan their investment decisions effectively. Remember to stay informed and consider market conditions before employing any investment strategy.

Disclosure: Author owns MSFT.

How About Investing in Old Computers?

by Fred Fuld III

Step into a captivating journey through time at Christie’s auction “Pushing Boundaries: Ingenuity from the Paul G. Allen Collection,” where nearly 40 remarkable documents and objects narrate the evolution of technology from pre-history to the present day. This extraordinary collection, primarily composed of 20th-century artifacts, mirrors Mr. Allen’s deep-seated passions and stands as a testament to the dizzying pace of technological advancement within our lifetimes.

If you are interested in technology and investing, you might want to place a bid on an Apple I personal computer, made in 1976, which formally rested on Steve Job’s desk. This item is has an estimated hammer price range of $500,000 to $800,000.

The auction’s crown jewel is Einstein’s pivotal letter to President Roosevelt, a document that catapulted the United States into the nuclear age and underscores the profound impact of technology on society. The collection also celebrates humanity’s relentless pursuit of exploration, featuring treasures like a 16th-century portolan chart, Jacques Cousteau’s visionary pitch-book, and key artifacts from the Space Race, including Ed White’s spacesuit cover layer, the pilot’s logbook from Apollo 8, flown items from Apollo 11, and the checklist from the first American spacewalk in June 1965.

Select highlights from this extraordinary sale will be on display at Christie’s New York through July 19. Don’t miss this unique opportunity to witness the milestones of human ingenuity and discovery.

Picture courtesy of Christie’s.

Pouring Profits: Why Investing in Liquor Stocks is a Smart Choice

by Fred Fuld III

The history of liquor stocks is mixed with the development of the alcoholic beverage industry, which has evolved significantly over the centuries. The commercial production and sale of alcohol can be traced back to ancient civilizations, but it was during the 18th and 19th centuries that the industry began to take on its modern form, with the establishment of well-known distilleries and breweries. 

The Prohibition era in the United States (1920-1933) posed a significant challenge, leading to a temporary collapse of the industry. However, the repeal of Prohibition saw a resurgence, with companies rapidly recovering and expanding. The mid-20th century marked the consolidation of the industry, as many smaller firms merged to form large, multinational corporations. 

Today, liquor stocks represent a major sector of the global market, characterized by stable demand, strong brand loyalty, and high profit margins. Companies like Diageo, Pernod Ricard, and Anheuser-Busch InBev dominate the industry, offering a wide range of products that cater to diverse consumer preferences. The continued innovation and expansion into emerging markets have solidified the status of liquor stocks as a compelling investment choice.

Why Liquor Stocks Are a Good Investment

Stable Demand and Market Resilience: 

Liquor stocks are often considered a reliable investment due to the consistent demand for alcoholic beverages. Unlike many other consumer goods, the demand for liquor tends to remain stable even during economic downturns. This resilience makes liquor companies less vulnerable to economic fluctuations, providing a steady revenue stream that can translate into stable stock performance. Additionally, established brands with strong customer loyalty can maintain their market share and profitability, further solidifying the attractiveness of liquor stocks.

High Profit Margins:

The liquor industry is known for its high profit margins, which can be attributed to the strong pricing power of established brands and the relatively low production costs. Premium and craft liquors, in particular, command higher prices and generate significant profits. These high margins can lead to robust financial health for liquor companies, making their stocks appealing to investors seeking both growth and income. The ability to pass on costs to consumers without significantly affecting demand helps these companies maintain their profitability even in inflationary environments.

Global Growth Opportunities: 

The liquor market is expanding globally, driven by increasing disposable incomes, urbanization, and changing social norms in emerging markets. Regions such as Asia-Pacific and Latin America are experiencing a growing demand for premium and imported liquors. This global expansion provides liquor companies with new growth opportunities, allowing them to tap into previously underserved markets. Investors can benefit from this international diversification, as companies with a strong global presence are better positioned to capitalize on these growth trends.

Innovation and Diversification: 

The liquor industry is continuously evolving, with companies investing in innovation and diversification to cater to changing consumer preferences. Trends such as craft spirits, ready-to-drink cocktails, and low-alcohol or alcohol-free beverages are gaining popularity. By diversifying their product portfolios and embracing new trends, liquor companies can attract a broader customer base and drive sales growth. This adaptability enhances their long-term growth prospects and makes their stocks attractive to investors looking for dynamic and forward-thinking companies.

Listed below are the top four liquor stocks:

  1. Constellation Brands, Inc. (NYSE: STZ) is a leading international producer and marketer of beer, wine, and spirits, known for popular brands like Corona, Modelo, and Svedka Vodka. STZ stands out as a solid investment due to its strong portfolio of high-demand products, consistent revenue growth, and strategic acquisitions that enhance its market presence. The company also has investments in the burgeoning cannabis industry through Canopy Growth. 
  • Diageo plc (NYSE: DEO) is a global leader in the alcoholic beverages industry, having a diverse portfolio of iconic brands such as Johnnie Walker, Guinness, Smirnoff, and Tanqueray. DEO is considered a strong investment due to its extensive market reach, strong brand equity, and consistent financial performance. The company’s strategic focus includes its expansion into non-alcoholic beverages and ready-to-drink cocktails. 
  • Brown-Forman Corporation (NYSE: BF-B) is one of the largest American-owned spirits and wine companies, renowned for its premium brands such as Jack Daniel’s, Woodford Reserve, and Old Forester. BF-B is an attractive investment due to its strong brand portfolio, which commands significant market share and consumer loyalty globally. Brown-Forman’s includes regular dividend payments make it a reliable choice for income-focused investors. 
  • The Duckhorn Portfolio, Inc. (NYSE: NAPA) is a prominent producer of luxury wines, known for its premium brands such as Duckhorn Vineyards, Decoy, and Goldeneye. NAPA stands out as a compelling investment due to its strong market position in the high-end wine segment. The company’s focus on quality and brand reputation has cultivated a loyal customer base and allowed it to maintain strong pricing power.
CompanyCompany SymbolPrice to BookPEGPEPrice to SalesForward PEYield
Constellation Brands IncSTZ4.621.7119.324.6817.11.42%
Diageo plc ADRDEO7.5214.2918.583.5717.313.08%
Brown-Forman Corp.BF-B5.94NA20.585.0122.632.05%
Duckhorn Portfolio IncNAPA0.844.1513.292.6611.53NA

Liquor stocks are a good investment due to the stable demand and market resilience of alcoholic beverages, which maintain steady revenue even during economic downturns. The industry is known for high profit margins, driven by strong brand pricing power and relatively low production costs, ensuring robust financial health. Global growth opportunities are abundant, particularly in emerging markets like Asia-Pacific and Latin America, offering companies new avenues for expansion. Additionally, continuous innovation and diversification, such as the rise of craft spirits and ready-to-drink cocktails, help liquor companies attract a broader customer base and sustain long-term growth.

Disclosure: Author had no positions in any of the above at the time the article was written.

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Book Review: Experiencing the American Dream

by Fred Fuld III

Mark Matson’s Experiencing the American Dream isn’t your typical dry finance book. It’s a wake-up call wrapped in a roadmap, guiding you towards financial freedom and a life designed by you. Matson shatters the myth of the get-rich-quick schemes and dives deep into the core principles of investing, presented in a clear and engaging way.

This book is more than just about building wealth. It’s about cultivating a healthy relationship with investments and money. Matson’s approach is refreshing, emphasizing the importance of investing your time and energy alongside your money.

To be totally forthright and so that you realize that this is an honest book review, there were a few very minor things that I disagreed with in the book, relating to time frames on some charts, certain stocks that were mentioned, and what are considered investment assets.

But I have minor disagreements with almost every book I read on investing. My opinions do not detract from the book in any way, as I consider the book to be complete, straightforward, and well written, with excellent documentation.

By the way, my favorite chapter is Chapter 5: The Investing Industry is Broken.

Here’s what truly elevates Experiencing the American Dream:

  • Actionable Advice: Matson doesn’t just talk the talk, he walks the walk. The book contains practical strategies and tools you can implement immediately, regardless of your financial background.
  • Focus on Purpose: This book goes beyond the numbers, prompting you to define what the American Dream truly means for you. By connecting your finances to your passions, Matson helps you build a life of fulfillment, not just a bigger bank account.
  • Solid Foundation: Backed by Nobel Prize-winning research, Matson’s methods are grounded in sound financial principles. You can be confident that you’re getting solid advice you can trust.

Whether you’re a complete beginner or looking to refine your investment approach, Experiencing the American Dream is a must-read. Matson empowers you to take control of your financial future and live a life on your own terms.

Why I Will Never Buy a Preferred Stock

The Not-So-Preferred Side of Preferred Stocks

by Fred Fuld III

Preferred stocks offer a tempting middle ground for investors seeking stability and income. They provide a fixed dividend payout, ranking ahead of common stockholders in line for those payouts. However, before diving into the world of preferred stocks, it’s crucial to understand the drawbacks that come with this investment.

One significant disadvantage of preferred stocks is the lack of voting rights. Unlike common shareholders who have a say in company decisions, preferred shareholders typically have no or limited voting power. This means you give up some influence over the company’s direction in exchange for the fixed dividend.

Another downside is no capital appreciation potential. Preferred dividends are fixed, meaning their value doesn’t fluctuate with the company’s performance. While this offers stability, it also means you miss out on the potential for significant stock price growth that common stocks can offer. 

Preferred stock prices are more likely to be swayed by interest rates than company performance. If interest rates rise, the fixed dividend of a preferred stock becomes less attractive, potentially causing the stock price to fall. So if you buy preferred stocks because you think that interest rates are going to drop in value, causing your preferred stock to go up, then maybe you should be trading the futures market on interest rates.

Here is a real life example. The Pacific Gas and Electric Company 6% 1st Cumulative Redeemable Preferred stock (PCG.PR.A) (PCG-PA) has a par value of $25. (Depending on your stock platform, the stock symbol may be different.) In the beginning of January of 2022, the stock was selling at 29.20. As interest rates started to go up, the price of the stock began dropping. It is now trading at 23.94.

If you think that buying a preferred stock ETF might be safer, think again. Look at the SPDR ICE Preferred Securities ETF (PSK) which traded at 42.31 and the beginning of 2022. Now it is at 33.51, a drop of over 20.7%, grossly offsetting any income receive during that time. Plus, if we don’t ever see those low rates again then, the ETF may never recover.

Many economist and analysts were predicting several interest rate drops this year from the Fed, and that hasn’t happened.

The Big Takeaway About Preferred Stocks

If interest rates stay the same from now on, the stock will never get back to that higher price, and won’t even get to the 25 par value. The important issue to keep in mind is that preferred stocks don’t have a yield to maturity.

At least if you own a bond, you know that eventually you will get the par value of at maturity, of generally $1000.

Furthermore, compared to bonds, preferred stocks generally carry lower credit ratings. This translates to higher risk of default, where the company may suspend or eliminate dividend payments altogether. While preferred shareholders get paid before common shareholders in a liquidation scenario, they still rank behind bondholders.

Finally, preferred stocks can sometimes be less liquid than common stocks. This means it may be harder to buy or sell them at your desired price, especially for less widely traded issues. The bid-ask spread, the difference between the price a buyer is willing to pay and the price a seller is willing to accept, can be wider for preferred stocks compared to common stocks.

You may think that preferred stocks can be a valuable addition to a diversified portfolio, but understanding the limitations is key. They may not be the ideal choice for investors seeking high growth potential or a strong voice in company governance. Carefully weigh the disadvantages against your investment goals before adding preferred stocks to your portfolio.

Disclosure: Author didn’t own any of the above at the time the article was written, and has no plans to do so.

Making Money with Cash-Secured Puts: A Stock Investor’s Strategy

by Fred Fuld III

For investors looking to boost their returns or acquire stocks at a discount, the cash-secured put strategy offers a compelling option. It involves selling (or “writing”) put options on a stock you’d be happy to own at a lower price, while also setting aside cash to buy the underlying shares if the option is exercised.

Here’s how it works:

  • Selling the Put Option: You grant the put buyer the right, but not the obligation, to sell you a specific number of shares (usually 100) at a certain price (strike price) by a certain time (expiration date). In return, you receive a premium upfront.
  • Cash Secured: To mitigate risk, you tie up enough cash in your account to cover the potential purchase of the stock at the strike price. This ensures you have the funds to fulfill your obligation if the buyer assigns (exercises) the put.

Here is an example:

XYZ stock is selling for $47 per share. You sell a put with a strike price of $45 for a price of $1. The one dollar price represents the price per share, so in essence, you are selling it for $100. Assume the put option expires in 30 days.

If the stock is above $45 at the end of 30 days, you get to keep the $100. If the stock is close to $45 as the expiration date approaches, the put would probably be selling for around five or ten cents a share, and at that point, you could buy back the put at a huge profit.

If the stock falls dramatically, for example to $43 per share, the put might get exercised and the owner of the put could “put it to you”. That means you would be forced to buy the stock at $45 (higher than the current market price, but at least it would be lower than then $47 at the beginning of the transaction), but you still get to keep the $100 premium.

However, the alternative would have been if you had bought 100 shares of the stock for $47 a share instead, you would have been worse off.

Potential Benefits:

  • Income Generation: Even if the stock price stays above the strike price by expiration, you keep the premium as income. This can be a great way to generate additional returns on your portfolio, especially in a flat or slightly down market.
  • Discount on Stock Purchase: If the stock price falls below the strike price by expiration, the put option will be exercised, and you’ll be assigned the shares. This allows you to buy the stock at a lower price.

Investor Considerations:

  • Stock Selection: Choose stocks you’re fundamentally bullish on and would be comfortable owning long-term,even if assigned the shares.
  • Strike Price: Select a strike price slightly below the current market price. This balances the potential for assignment with the premium earned.
  • Expiration Timing: Consider a longer expiration period to allow for potential stock price recovery and maximize premium income. However, this also increases the risk of assignment.

Understanding the Risks:

  • Stock Price Decline: If the stock price falls significantly, you’ll be forced to buy shares at a higher cost than the current market value.
  • Missed Opportunity: If the stock price rises sharply, you’ll only profit from the premium received, missing out on the potential for greater gains.
  • Early Assignment: The put buyer can exercise the option before expiration, potentially forcing you to buy the stock sooner than anticipated.

Cash-secured puts are a versatile strategy for income-oriented investors or those looking to acquire stocks at a discount. However, careful planning and a strong understanding of options basics are crucial for successful implementation.

Unlocking Potential: Will Firearm Stocks Achieve Their Target Price?

Investing in the stock market offers a myriad of opportunities, with various sectors presenting unique advantages and potential returns. One often overlooked yet consistently robust sector is the firearm industry. With a historical track record of resilience and growth, firearm stocks have proven to be a strong addition to many investment portfolios. Let’s look at why investing in firearm stocks can be a smart financial decision for both novice and seasoned investors.

Why Firearm Stocks Are a Good Investment

Stability and Growth

Firearm stocks have shown remarkable stability and growth over the years, often outperforming other sectors during economic downturns. The consistent demand for firearms and ammunition, driven by both consumer interest and governmental contracts, provides a reliable revenue stream for companies in this industry. This steady demand helps to insulate firearm stocks from the volatility that can affect other sectors, making them a safer bet in uncertain economic times.

Diversification and Resilience

Investing in firearm stocks can add a valuable layer of diversification to an investment portfolio. The firearm industry is somewhat immune from the broader economic cycles that impact other sectors, such as technology or consumer goods. This resilience is partly due to the industry’s strong ties to national defense and personal security, which remain priorities regardless of economic conditions.

Innovation and Market Expansion

The firearm industry is not just about traditional firearms; it is also at the forefront of technological innovation and market expansion. Companies in this sector are continually developing advanced firearms, smart technology integration, and improved safety features. Additionally, the global market for firearms is expanding, with rising interest in self-defense, recreational shooting, and hunting in various regions. This growth potential, coupled with ongoing innovation, ensures that firearm stocks remain a dynamic investment opportunity.

Listed below are the top five firearm stocks:

  1. Smith & Wesson Brands, Inc. (SWBI) is a leading manufacturer of firearms, known for its extensive range of high-quality products, including handguns, rifles, and accessories. The company has a strong reputation built over a century and a half, which supports a loyal customer base and steady demand. Financially, SWBI has demonstrated consistent performance with solid revenue growth and profitability, supported by strategic diversification into lifestyle and outdoor products. Its focus on innovation and expanding its market presence ensures that it remains competitive. 
  • Sturm, Ruger & Company, Inc. (RGR) is a well-established leader in the American firearms industry, renowned for its durable and reliable firearms. RGR has a strong track record of financial stability, by having a healthy balance sheet with minimal debt and a consistent history of dividend payments. The company’s focus on innovation, quality, and customer satisfaction has helped it maintain a loyal customer base and a competitive edge in the market. With its efficient manufacturing processes and ability to quickly adapt to market demands, RGR is well-positioned for sustained growth. 
  • Byrna Technologies Inc. (BYRN) is a pioneering company in the non-lethal defense market, known for its innovative personal security devices. Byrna’s flagship product, the Byrna HD, is a handheld launcher designed to provide a safe alternative to firearms, appealing to both security-conscious consumers and law enforcement agencies. The company’s commitment to safety and innovation has driven strong sales growth and expanding market penetration. As societal focus on non-lethal self-defense options increases, Byrna’s market potential continues to grow.
  • Axon Enterprise, Inc. (AXON) is a leading provider of public safety technology, best known for its Taser devices and body-worn cameras. AXON’s innovative product portfolio, including advanced software solutions for evidence management and data analytics, supports law enforcement agencies in enhancing transparency and efficiency. The company has demonstrated robust financial performance with consistent revenue growth driven by its recurring subscription model and global expansion. As the demand for improved public safety technology continues to rise, AXON offers substantial growth potential for investors seeking to invest in the future of public safety.
  • Ammo, Inc. (POWW) is a dynamic player in the ammunition manufacturing industry, known for its high-quality products and innovative technology. The company’s diverse product line includes ammunition for a wide range of firearms, catering to military, law enforcement, and civilian markets. POWW has shown impressive revenue growth, driven by increasing demand for ammunition and strategic acquisitions. With its focus on innovation, such as environmentally friendly ammunition, and its strong distribution network, Ammo, Inc. is well-positioned for continued expansion. 
CompanyCompany SymbolPrice to BookPEGPEPrice to SalesForward PEYield
Smith & Wesson Brands IncSWBI1.641.1116.691.22NA3.36%
Sturm, Ruger & Co., Inc.RGR2.18NA18.071.3613.981.52%
Byrna Technologies IncBYRN5.13NANA4.46124.750.00%
Axon Enterprise IncAXON12.214.7285.9613.2151.380.00%
AMMO IncPOWW0.56NANA1.387.640.00%

Investing in firearm stocks offers a unique blend of stability, diversification, and growth potential. By understanding the strengths of this sector, investors can make informed decisions that enhance their portfolio’s performance and resilience.

Disclosure: Author owns RGR, SWBI, and POWW.

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